The JOBS Act and SEC Deregistration: New Thresholds and Special Considerations for Banks and Bank Holding Companies
June 8, 2012
Authored by: Bryan Cave Leighton Paisner
The Jumpstart Our Business Startups Act (the “JOBS Act”), which was enacted on April 5, 2012, established, among other things, new shareholder headcount thresholds relating to SEC registration. For banks and bank holding companies (“BHCs”), registration and reporting under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is required for any class of securities held by more than 2,000 shareholders of record as of the end of a given fiscal year, and deregistration is permitted for any class of securities held by fewer than 1,200 shareholders of record under the timing rules described below. The reports in question include annual (10-K), quarterly (10-Q) and periodic (8-K) reports; proxy statements; Forms 3, 4 and 5; Schedule 13D and 13G reports; and other reports required under the Exchange Act.
The JOBS Act allows a bank or BHC to terminate its registration under Section 12(g) of the Exchange Act effective 90 days after filing a Form 15 certifying that it has fewer than 1,200 shareholders of record. For a bank/BHC that currently has fewer than 1,200 shareholders of record, termination can be effected without a stock buyback, share reclassification or other “going-private” transaction. Instead, a board resolution, Form 8-K, press release and, if desired, a letter to shareholders would be all that would be required. This is frequently referred to as “going dark” or “turning off the lights.” The new thresholds also apply to going-private transactions, however, and banks and BHCs that did not previously have the resources to cash out a significant number of shareholders or that had more shareholders of record than could be accommodated reasonably in multiple classes of stock via a share reclassification transaction may wish to revisit the idea of going private in the wake of the JOBS Act.
A bank or BHC that terminates its Section 12(g) registration and reporting obligations will remain eligible to avoid re-registration and reporting so long as it has fewer than 2,000 shareholders of record (or 1,200 if it has ever previously filed a registration statement for an offering of securities under the Securities Act of 1933, as amended (the “Securities Act”)), at the end of a given fiscal year. Examples of Securities Act registration statements include Forms S-1 (public offering), S-3 (short-form public offering), S-8 (employee benefit plans) and S-4 (business combinations). The different threshold for companies that have previously filed a registration statement arises from Section 15(d) of the Exchange Act, which requires such companies to file periodic reports under the Exchange Act for the remainder of the fiscal year in which a Securities Act registration statement was declared effective.
The decision to deregister involves balancing the advantages and disadvantages of “going dark” to the bank/BHC and its shareholders, and each bank or BHC will need consider the issues in light of its particular facts and circumstances. In general, relevant considerations include: